HSC Information Processing and Technology/Transaction Processing Systems

Characteristics of Transaction Processing Systems

TRANSACTION PROCESSING SYSTEMS- collect, store, modify and retrieve the transactions of an organisation. A transaction is an event that generates or modifies data that is eventually stored on an information system. The main information processes are collecting and storing. The four important characteristics of a TPS are:

  • RAPID RESPONSE- Fast performance with a rapid response is critical. Input must become output in seconds so customers don’t wait.
  • RELIABILITY- Organisations rely heavily on their TPS with failure possibly stopping business. Back-up and recovery procedures must be quick and accurate.
  • INFLEXIBILITY- A TPS wants every transaction processed in the same way regardless of user or time. If it were flexible there would be too many opportunities for non-standard operations.
  • CONTROLLED PROCESSING- The processing must support an organisation's operations.

Common System Characteristics

Specific Characteristics

Four important characteristics of a TPS are:

Rapid Response Reliability Inflexibility Controlled Processing

Properties of a TPS

The components of a TPS include hardware, software and people. The most important component of a TPS are people. Without people the system does not have customers and without customers it does not have a function to perform. People in a TPS can be divided into 3 categories: users, participants and people from the environment.

Users: The users are people employees of the company who own the TPS. They will use it to provide information information about the system but will not enter data themselves. The information they provide from the TPS may be used to provide inputs for other information systems such as stock control, marketing etc... Participants: Participants are direct users of the system. These are the people who will enter the data. They include data entry operators, customer service operators, people working at checkouts and anyone carrying out the tasks required to process the data. People From The Environment: These are people who do not directly work for the company but people off the street who sometimes require the services of a TPS as they enter transactions and validate data such as a customer withdrawing money from an ATM.



Types of Transaction Processing Systems

Batch Transaction Processing

BTP collects the transaction data as a group and processes it later after time delay as batches of identical data. Processed when convenient or economical to do so. Large volumes have lower processing costs. Collected and stored offline using magnetic tape or paper. Batch approach is used for generating pay cheques etc. Carried out in large organisations using mainframe or midrange computers. Three disadvantages are the transactions must wait for processing as schedule is predetermined, errors cannot be corrected during processing and sorting transaction data is expensive and time consuming. Examples of BTP systems include:

  • CHEQUE CLEARANCE- A cheque is a written order asking the bank to pay an amount of money to a particular person. When one is issued to a person they deposit it into a bank account yet the money cannot be withdrawn until the cheque is cleared. This involves checking the that the cheque writer has enough money in their account to cover it usually taking 3 working days in which cheques are cleared in a group during a quiet period of the day.
  • BILL GENERATION- Organisations develop a bill or invoice of services or products supplied to a customer. Usually generate a group of bills at a scheduled time as this enables the user to effectively mange time and results in less disruption to main database.
  • CREDIT CARD TRANSACTIONS- Credit cards have become a method of paying for goods and services. In a credit slip system the retailer sends credit slips to the bank as a group. In POS terminal sales the transactions are stored for processing later. The customers may view their credit card transactions a real-time but the actual updating is batch.

Real-Time Transaction Processing

RTTP is the immediate processing of data. Provides instant confirmation yet requires access to online database. Involves using terminal or workstation to enter data and display results and a large number of users to simultaneously perform transactions. Uses computer network to link terminals to mainframe computer and database. Every real-time TPS has a response time delay. For a TPS to be classified real-time the response time delay must be acceptable for that application. Main disadvantage of RTTP is the hardware and software costs exceed batch. Two main concerns:

  • CONCURRENCY- ensures two users cannot change the same data at the same time. One must wait until the other is finished.
  • ATOMICITY- ensures all the steps involved in a transaction are completed successfully as a group. If one step fails no other step should be completed.

Examples of RTTP systems include:

  • RESERVATION SYSTEMS- involve setting aside a service or product for the customer to use at a future time. Commonly used for travelling such as in flight or train bookings and motel reservations. Require an acceptable response time because transactions are made in presence of customers.
  • POS TERMINALS- are used by retail stores to sell goods and services. Send inventory data to a central computer (mainframe or midrange) when sale is made which does the processing for entire chain. To accomplish this the data is converted to a form that is easily transmitted through a communication system. If the POS terminal immediately processes the transaction it minimises the cost of batch handling. Advantage is that the correct price of the product is received once the product is entered usually through barcodes when barcode readers are used to identify the product. The POS terminal can provide price and any other relevant information about the product.
  • LIBRARY LOAN SYSTEM- is used to keep track of items borrowed from the library. When a book is borrowed the librarian scans the barcode on the person’s membership card and the book. This information and the date are immediately recorded on the library database. All in real-time. Similar to reservation system as operational activities involve keeping information on products, availability, usage and maintenance. Also has ‘front office’ and ‘back office’. Only difference is that loan system has more items, which are stored in a data warehouse.

Data Validation

Is used to check the entry of transaction data. Involves procedures to ensure transactions are correct and accurately stored in the database. Even though essential it is impossible to validate all data. Involves:

  • TRANSACTION INITIATION- is used to acknowledge that the TP monitor is ready to receive the transaction data. Used in real-time to eliminate a number of possible errors. Some TPSs add entry data to transactions to trace if data is lost.
  • FIELD CHECKING- occurs when transaction data is entered into database. Data validation is carried out using range check, type check, list check or check digit.

The Historical Significance of Transaction Processing Systems

Manual Transaction Systems

Are business systems that operate without the use of machines. People are used to record the data about business activities e.g. a manual POS system. Computerisation of manual transaction systems provides significant benefits to the business. It increases the rate products are sold and provides information on which products are in demand. After a period of time business can modify product range to suit customers habits. Aims to maximise profit of business.

The Work Routine of Manual Transaction Processing Systems

Examples of Transaction Processing Systems

Batch Processes

  • Clearing cheques

A cheque is a written order asking the bank to pay a certain amount of money to a particular person. When a cheque is issued to a person, he or she deposits it into a bank account. However, the money cannot be withdrawn until the cheque has been cleared. Cheque clearance involves checking that the person who wrote the cheque has enough money in his or her account to cover the cheque. It usually takes three working days. (i.e. batch processing - collecting the data as a group/batch, and processing it later usually involving the time delay). Cheques are cleared as a group when it is economical for the bank.

  • Generating bills

Organisations create bill, or invoice, for goods or services that have been supplied to a customer. They usually generate a group of bills at a scheduled time. This enables the user to effectively manage his or her time and results in less disruption to the main database. Bill generation is not done immediately but as a group.

  • Manual credit card transactions (carbon copy machine)

These are done by taking an impression of the cutomer’s credit card on a multi-page credit slip, which is then filled in by the sales clerk. The retailer sends the credit slips to the bank in a group and does not send each credit slip individually. Credit card transactions are processed as a batch.

Real-time Processes

  • Reservation systems

Reservation systems are used extensively in any type of business involved in setting aside a service or product for a customer to use at a future time. They are commonly used for people who are travelling, such as making a motel reservation or booking a seat on a train.

  • POS terminals (point of sale i.e. scanner / cash register, EFTPOS)’

POS terminals are used by retail stores to sell goods and services. In large retail organisations, POS terminals send inventory data to a central computer when the sale is made. The central computer is usually a mainframe or mid-range computer that does the processing for the entire chain. If the POS terminal immediately processes the transaction data, it minimises the costs of batch handling. To accomplish this centralised processing of the transaction data, the data is converted to a form that can be easily transmitted through a communication system.

  • Library loan systems

A library loan system is used to keep track of items borrowed from the library. When a person borrows a book, the librarian scans the barcode on the person’s membership card and the barcode on the book. This information and the date are immediately recorded on the library database. The library loan system complete each transaction in real-time.

Database Storage

When designing a database for RTTP these features are important:

  • GOOD DATA PLACEMENT- the database should be designed to access patterns of data use and place frequently accessed data together as there is a large numbers of users.
  • SHORT TRANSACTIONS- enables entire transaction to be processed immediately improving concurrency.
  • REAL-TIME BACKUP- needs to be scheduled at times of low activity to minimise effects on users and downtime.
  • ARCHIVING OF HISTORICAL DATA- (data referenced infrequently) in a separate table keeps tables as small as possible improving backup times and queries.
  • HIGH NORMALSATION- keeping redundant information to a minimum increases the speed of updates and improves concurrency.
  • GOOD HARDWARE CONFIGURATION- hardware needs to be able to handle a large number of concurrent users and provide quick responses.

An organisation stores all accounting and operational records in a database (operational database). This database is a model of the organisations operations.

The data in this database is defined by a schema usually having a restricted view called a subschema. Structures include:

The Hierarchical Model

HIERARCHICAL- organises data into a series of levels using a top-down structure of nodes and branches. Each node can have many branches. But each lower level node (child) is linked to only one higher level node (parent).

The Network Model

NETWORK- organises data into a series of nodes linked by branches where each node can have many branches and each child may be linked to more than one parent.

The Relational Model

RELATIONAL- organises data using a series of related tables where relationships are built between tables to provide a flexible way of manipulating and combining data.

File Storage

A file is a block of data. In database a set of related records containing specific information such as customer or product details. In a TPS there are 5 types:

Types of Files

  • MASTER FILE- contains information about an organisation’s business situation. Stores the operational database and transaction data.
  • TRANSACTION FILE- collection of transaction records. Data in this file is used to update master file. Also serve as historical audit trails.
  • REPORT FILE- contains data that has been formatted for presentation to a user.
  • WORK FILE- temporary file used during processing.
  • PROGRAM FILE- contains instructions for processing of data created from high-level programming languages.

Manual File Storage

Electronic File Storage

Data Warehousing

A DATA WAREHOUSE Is a database that collects information from different data sources. Provides data that is:

  • CONSOLIDATED- Data is organised using consistent naming conventions, measurements, attributes and semantics. Organisations can use similar data in different formats. Allows data from across the organisation to be used effectively in a consistent manner.
  • SUBJECT-ORIENTATED- A data warehouse organises only relevant key business information from operational sources so that it is available for analysis.
  • HISTORICAL- Data stored in a data warehouse is accurate for a specific moment of time as it represents historical information and cannot change. The data warehouse stores snapshots of operations over a period of time.
  • READ-ONLY- After data has been moved to the data warehouse it does not change unless incorrect. Must never be updated as it represents particular point in time. Data can only be loaded and queried.

Backup and Recovery Procedures

Organisations are very dependent on their TPSs. A breakdown may stop business while well-designed backup and recovery minimise disruptions. If the system goes down the recovery process rebuilds it. This process involves:

  • BACKUP-periodic backups are usually made once a day of the entire system and stored in a secure location.
  • JOURNAL- maintains an audit trail of transactions and database changes. The transaction log stores all essential data for each transaction while the database change log contains before and after copies of records modified by transactions.
  • CHECKPOINT- The DBMS periodically suspends all processing to synchronise files and journals in a ‘quiet time’. Transactions in progress are completed and journals updated. It then writes a record to the transaction file called the ‘checkpoint record’. A copy of the database up to this point is a ‘checkpoint copy’. Should be taken frequently for if failure occurs it is possible to resume processing from the most recent checkpoint.
  • RECOVERY MANAGER- is a program that stores the database to a correct condition and restarts the transaction processing.
  • BACKUP- is another copy of the data that could be used to rebuild the system.
  • MAGNETIC TAPE- is a very long thin strip of plastic coated with a thin layer of magnetic material. Data is retrieved using sequential access. Often used as a backup medium as it can store large quantities of data inexpensively.
  • GRANDFATHER-FATHER-SON- is a backup procedure that involves at least 3 generations of backup master files. The most recent is the son; followed by the father with the oldest being the grandfather. Commonly used with magnetic tape in batch. If failure occurs the son is used yet if it is lost or destroyed the father is used. The process of keeping several generations of backup files ensures the data can be recreated not lost.
  • PARTIAL BACKUPS- occur when only parts of the master file are backed up usually to magnetic tape at regular intervals such as weekly or monthly. Transactions completed since the last backup are stored separately in journals. In the event of a failure the master file is recreated using the backup tape and journal files.

Updating Data

Update in Batch

Is used when transactions are recorded on paper or magnetic tape and requires sequential access, as it is the only method of accessing data on magnetic tape. All previous transactions before the desired one must be examined. There are two stages. The first is collecting and storing transaction data in transaction file which involves sorting into sequential order. The second stage is the processing of the data by updating the master file. If an error occurs then the entire batch is rejected.

Update in Realtime

The steps of updating in real-time involve sending the transaction data to an online database in the master file. Data is accessed using direct access often with the use of an index. Magnetic disk storage provides a secondary storage medium of large quantities of data with quick access. The software is online and user-friendly.

Other Information Processes

Data Collection for a Transaction Processing System

In a TPS this step involves generating the transaction data.

  • HARDWARE- used to collect data for a TPS includes:
    • MICR (MAGNETIC INK CHARACTER RECOGNITION)- Characters are printed using magnetic ink that contains magnetised particles such as account numbers. MICR systems quickly and accurately read prerecorded data on cheques and deposit slips processing them very fast. They are batch transaction processing systems.
    • BARCODE READERS- are used in retail organisations to collect product information at POS. Supermarkets use laser barcode readers and many businesses use a handheld variety. The product information is held on a central computer linked to the POS terminal and displayed here when the barcode is read and printed on a receipt. Used by libraries also.


FORMS- a document used to collect data from a person. When the form is collected it is processed in batch or real-time. Paper forms include sign-on sheets for payroll and once completed and collected are processed in batch at a convenient time. On-screen forms are created for computerised data entry purposes to populate fields in a database. A transaction is completed when the user completes the form. A web form is used by users who wish to purchase an item over the Internet. The data from this form is processed immediately (real-time) or at a later time as a group of web forms (batch). The responses become fields in a database. A well-designed form provides information on the required data and any rules that apply to particular fields. Forms minimise data entry errors by automatically filling in previously stored data, such as address, once the user has entered the customer’s name.

Data Analysis for a Transaction Processing System

The results of processing transaction are stored in a database and analysed in many ways to meet the information needs of users i.e. The output from a TPS is the input to other types of information systems such as:

Decision Support System

DECISION SUPPORT SYSTEMS-which use data mining to find relationships and patterns in data stored in a database. This may uncover trends between the sales of certain things for instance such as pies and sauce. The information obtained from data mining allows organisations to make informed decisions about topics such as improved marketing campaigns or locations for a new store.

Management Information Systems

MANAGEMENT INFORMATION SYSTEMS- provide information for the organisation’s managers. Present basic facts about the performance of the organisation. MIS output includes ales reports, stock inventory, payroll, orders and budgets. Generally presented in report form. Types include:

  • SCHEDULED REPORTS- are standard reports provided on a regular basis.
  • FORECASTING REPORTS- are used to make projections about business trends. Important to decision making and strategic planning.
  • ON-DEMAND REPORTS- are generated on request usually in response to a specific need.
  • EXCEPTION REPORTS- are used to help alert management to unexpected or unfavourable situations that necessitate special handling.

Issues Related to Transaction Processing Systems

The Nature of Work

NATURE OF WORK- TPSs change the nature of work for people.

Automation of Jobs

AUTOMATION OF JOBS- refers to the use of information technology to perform tasks once carried out by people. Organisations are increasing their use of information technology and TPSs, which allow them to become more efficient and offer new services yet, requires workers to learn new skills and complete ongoing training. Results in fewer people being required to perform the same task yet the loss of jobs in one industry is replaced by job growth in another such as IT. All that is required is retraining for new roles.

People as Participants

PEOPLE AS PARTICIPANTS- People from the environment have become participants as they directly enter transactions. This brings a significant change to the nature of work. For example ATMs carry out tasks once performed by a person resulting in fewer bank jobs. The Internet is also allowing people to become participants in TPSs as they purchase goods online using web forms thus bypassing people providing the service in a shop front. This also means more opportunities are created in the IT industry.

Data Handling

IMPORTANCE OF DATA- Organisations rely on TPSs and the data they process.


BIAS- means the data is unfairly skewed or given too much weight to a particular result. Data must be free from bias. Rarely an issue in collection of data in a TPS as the information process is carefully designed and examined in many ways. However data gathered from a TPS can be presented in a biased way using tables and charts. Some bias may also exist in any explanation however it becomes an ethical issue when relevant information is knowingly misinterpreted.

Data Security

DATA SECURITY- involves a series of safeguards to protect data as it is under threat of being stolen, destroyed or maliciously modified. There is greater risk when the data is accessible to multiple users in a RTTP system. The first line of defence is to only allow access to authorised people using passwords, personal objects and biometric devices. Some people are capable of evading these. Further safeguards include firewalls and encryption.

Data Accuracy

DATA ACCURACY- is the extent to which data is free from errors. Data entered into a TPS is not always accurate as errors can be caused by mistakes in gathering and entering the data, mismatch of data and person or out-of-date information. Opportunities need to exist to check and change data if it is wrong. Data validation is used to check the entry of data. A well-designed TPS checks each transaction for easily detectable errors such as missing data, incorrect values or consistency, or data in the wrong format. Carried out using range checks, type checks, list checks and check digit.

Data Integrity

DATA INTEGRITY- describes the reliability of data. Involves accuracy, concurrency and relevance of data. Integrity in a RTTPS is provided by passing the ACID test:

  • ATOMICITY- occurs when all steps involved in a transaction are completed successfully as a group. If any step fails no more steps are completed. If the first succeeds then the second does or the entire transaction is abandoned. If some succeed and others fail there is no atomicity.
  • CONSISTENCY- occurs when a transaction successfully transforms the system and the database from one valid state to another.
  • ISOLATION- occurs if a transaction is processed concurrently with other transactions and still behaves as if it were the only transaction executing the system. Transactions must not interfere with each other’s data base updates.
  • DURABILITY- occurs if all the changes that a transaction makes to the database become permanent when the transaction is committed.
Non-Computer Procedures

NON-COMPUTER PROCEDURES- Many organisations rely heavily on their TPS. When the system fails non-computer procedures are needed to complete transactions in real-time. When the computer is working again the user needs a procedure to enter these procedures.

Control in Transaction Processing

CONTROL IN TRANSACTION PROCESSING starts with collecting and includes the way the TPS manipulates the data and the way errors are corrected. Data preparation and authorisation create the transaction data that will be entered into the TPS. People in management positions of some organisations have false transaction data to promote careers. The results of a TPS are not always correct meaning people should not become completely dependent on them. They need to maintain control over their organisation’s operations.